Smth about Apogee Company
The argument gratuitously states that Apogee Company turned to be less profitable purely because of de-centralization. To revert the trend, the author of the report suggests to shut down subsidiaries and manage all operations from head office. The suggestion is ill-founded due to following reasons.
First of all, suggestion that de-centralization caused costs increases has not any background. Cost could increase because of growth of market prices on raw materials or because of surge of labor wages or because of new, more expensive pack materials suggested by marketing team. Thus, if author wants to prove that decentralization caused profit deterioration, additional information should be cited.
Secondly, de-centralization is commonly perceived as a boon for business profitability growth. Remember Fortune 100 companies, majority of them have local offices in every significant market of the globe with local management. Moreover, for example Unilever in Russia has a local office in every city with population over 1 million and sales representatives in every city with population over 100 000. Such a practice helps the company to give better customer service as well as to improve costs on transportation. Return to outdated practice of centralized management of all operational processes will unlikely improve costs. Especially if Apogee Company is working within distribution of fast moving goods sector.
And last but the not the least, the business decision based on only one business indicator, such as profitability, is hasty and insufficient. If a percent of net sales to net margin decreased but at the same time the net margin itself increased significantly, that means a company is growing but working less effectively compared to previous period. Such an indicator calls for necessity to look closer on current expenses and find out how to cut them down rather that to cut down innovations which increase net margins.
To sum up, the decentralization itself is not an evil. To find out what caused margin dilution the one should look closer at reasons of profit loss.
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The argument gratuitously states that Apogee Company turned out to be less profitable purely because of decentralisation. To revert the trend, the author of the report suggests to shut down subsidiaries and manage all operations from head office. The suggestion is ill-founded due to following reasons.
First of all, suggestion that de-centralization caused costs increases has not any background is without foundation. Cost could increase because of growth of market prices on raw materials or because of a surge of in labor wages or because of new, more expensive packing materials suggested by marketing team. Thus, if the author wants to prove that decentralization caused profit deterioration, additional information should be cited.
Secondly, de-centralization is commonly perceived as a boon boom for business profitability growth. Remember Fortune 100 companies, the majority of them have local offices in every significant market of the globe with local management. Moreover for example Unilever in Russia has a local office in every city with a population over 1 million and sales representatives in every city with a population over 100 000. Such a practice helps the company to give better customer service as well as to improve costs on transportation. Returning to outdated practice of centralized management of all operational processes will unlikely improve costs, especially if Apogee Company is working within distribution of the fast moving goods sector.
And Last but the not the least, the business decision based on only one business indicator, such as profitability, is hasty and insufficient. If a the percentage of net sales to net margin decreased but at the same time the net margin itself increased significantly, that means a company is growing but working less effectively / efficiently compared to a previous period. Such an indicator calls for necessity to look closer on at current expenses and find out how to cut them down rather that than to cut down innovations which increase net margins.
To sum up, the decentralization itself is not an evil. To find out what caused margin dilution then one should look closer at reasons of for profit loss.
First of all, suggestion that de-centralization caused costs increases has not any background is without foundation. Cost could increase because of growth of market prices on raw materials or because of a surge of in labor wages or because of new, more expensive packing materials suggested by marketing team. Thus, if the author wants to prove that decentralization caused profit deterioration, additional information should be cited.
Secondly, de-centralization is commonly perceived as a boon boom for business profitability growth. Remember Fortune 100 companies, the majority of them have local offices in every significant market of the globe with local management. Moreover for example Unilever in Russia has a local office in every city with a population over 1 million and sales representatives in every city with a population over 100 000. Such a practice helps the company to give better customer service as well as to improve costs on transportation. Returning to outdated practice of centralized management of all operational processes will unlikely improve costs, especially if Apogee Company is working within distribution of the fast moving goods sector.
And Last but the not the least, the business decision based on only one business indicator, such as profitability, is hasty and insufficient. If a the percentage of net sales to net margin decreased but at the same time the net margin itself increased significantly, that means a company is growing but working less effectively / efficiently compared to a previous period. Such an indicator calls for necessity to look closer on at current expenses and find out how to cut them down rather that than to cut down innovations which increase net margins.
To sum up, the decentralization itself is not an evil. To find out what caused margin dilution then one should look closer at reasons of for profit loss.
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Something about the Apogee Company
The argument gratuitously states that Apogee Company turned out to be less profitable purely because of de-centralization. To reverse the trend, the author of the report suggests shutting down subsidiaries and to manage all operations from head office. The suggestion is ill-founded due to the following reasons.Firstly, the suggestion that de-centralization caused cost increases has not any background. Costs could increase because of the growth of market prices of raw materials or because of a surge of labor wages or because of new, more expensive pack materials suggested by the marketing team. Thus, if author wants to prove that decentralization caused less profits, additional information should be cited.
Secondly, de-centralization is commonly perceived as a boon for business profitability growth. Regarding the Fortune 100 companies, the majority of them have local offices in every significant market of the globe with local management, eg Unilever in Russia has a local office in every city with a population over 1 million and sales representatives in every city with a population over 100 000. Such a practice helps the company to give better customer service as well as to improve transport costs. A return to the outdated practice of centralized management of all operational processes will unlikely improve costs. Especially if Apogee Company is working within distribution of the fast moving goods sector.
Finally, a business decision based on only one business indicator, such as profitability, is hasty and insufficient. If the ratio of net sales to net margin decreased but at the same time the net margin itself increased significantly, it would mean that a company is growing but working less effectively compared to the previous period. Such an indicator calls to necessarily look closer at current expenses and to find out how to cut them down rather than to cut down innovations which increase net margins.
To sum up, decentralization itself is not an evil. To find out what caused margin shrinkage one should look closer at reasons of profit loss.
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